Homami v. Iranzadi

• Mr. Homami = "Homami" = plaintiff = lender
• Mr. Iranzadi = "Iranzadi" = defendant = borrower
• Homami & Iranzadi are brothers-in-law
• Homami lent Iranzadi $250,000 to pay for a real estate transaction involving 2 properties.
• The promissory notes stated that the loans didn't bear interest.
• Iranzadi made payments of about $40,000/month.
• Next, the 2 parties modified the promissory notes to accelerate the due date of the entire loans to the upcoming September.
• The loans modification stipulated that after June 22, 1985, interest would be charged on the loans at a rate of 18%/year.

• All of a suddenly, Iranzadi stopped making payments.

The 2 properties of Iranzadi went into foreclosure because Homami filed notices of default.

• Iranzadi sold 1 property & paid back $125,000.
• Iranzadi, however, didn't pay back the full $125,000 after selling the 2nd property.
• Therefore, Homami didn't receive back the full $250,000 he had lent--let alone any interest.

Homami sued for breach of contract.

At trial, Homami told the court that the 2 parties had agreed to not report the interest payments in the modified contract to avoid paying taxes.

Homamai won in the California trial court.

Is a contract with an illegal purpose void?

Yes. A contract with an illegal purpose is contrary to public policy & void.

Reversed

3 judge panel: Courts refuse to enforce illegal agreements even if the non-enforcement benefits opposing parties because non-enforcement is a deterrent.

• Illegality Defense
• Contracts/Illegality

Courts won't help when

1. un-licensed professionals or contractors sue customers for non-payments
2. recovery of money is from illegal gambling
3. contracts that break or avoid federal law